10 Ways to Finance Your Business | Brian Tracy

hello I'm Brian Tracy and I have

personally started built managed or

turned around 22 businesses but more

than that I've worked with more than

10,000 business owners starting

one-person businesses on their kitchen

tables and people who run billion-dollar

enterprises and one of the key questions

that keeps coming up is where do you get

the money to finance your business well

there's many different ways and in this

time that we spend together I want to

give you 10 ways that you can finance

your new business 68% of startup

financing comes directly from the pocket

of the business owner I remember

listening to a professor talk and saying

never put your own money into your own

new business and this person was a

complete idiot you cannot start a

business without your own money and

nobody will lend you any money unless

you've got hurting money on the table in

there so you can sell high-priced items

that you simply don't need to raise the

money you know there's some times you

have to sell a lot of stuff to get the

cash you need you're going to have to

like plain of No Limit poker you're

gonna have to go all-in

now a second ways you can get money to

start your business is with angel

investors now angel investors are people

who have money and they've made it

through their own business and through

their own careers and what they're

looking for is opportunities to get a

high return on their money the venture

capitalists and these are kind of angel

investors are kind of like little

venture campus they'll make a lot of

small investments hoping that one or

more of them will really explode the

reason that you use them is because

there's a lot of them they have

different parameters some invest in high

tech some invest in restaurants some

invest in different types of businesses

they also bring with them really good

knowledge of industries so they are not

only an investor but they give you

really

good ideas and sometimes they can give

you guidance with regard to product

development marketing sales and so now

the pros and cons the pros of using an

angel investor is they've got the money

and they can make a decision quickly the

cons are is that they will want to take

a part of your business

sometimes a substantial part like

venture capitalists they'll often want

the right to step in and take over your

business and push you out completely if

you do not deliver on your projections

they want to protect themselves and

they're very smart about protecting

themselves

now the third place you can get money is

friends and family now it's interesting

with friends and family we say that we

call this love money is people who give

you money or lend you money because they

love you now it's a terrific idea in

theory to get money from your fans and

family when I started my business by the

way I have used all of these and I had

to go to my brother's and I had to go to

my parents and I had to go to my friends

that I'd worked with and hat in hand and

ask them for money to get started or to

keep going

now there's one crucial rule when you're

dealing with friends and family is put

everything in writing this makes sure

that it's absolutely clear how much they

are putting in and how much they will

get out and when they will get it out

the pros and cons of friends and family

are that they can be a real pain in the

neck they can call you up every day and

say how's it going when can I get my

money back how soon can I get my money

back and so be careful when you take

money from people that you know it can

be more expensive than you realize and

not just financially now another place

to raise money is with credit cards now

it's good in theory to raise money with

credit cards but before you turn to

plastic for financing consider the risk

the pros are you can get large amounts

of capital quickly the cons are you pay

very very high interest rates so if

you're going to borrow money on your

credit cards plan to pay it back quickly

because if not that interest will add up

fast and it can eat you alive now when I

started off my business one of the

things I did and somebody taught me this

get good credit

before you need it now another way to

raise money in financing is with bank

loans now it's the most amazing darn

thing people say well just go to the

bank and borrow money so you go to the

bank and the bank says no and you go to

the next Bank that Mac says no because

see well why won't banks lend me money

to start up my business banks don't lend

money to start up businesses banks are

in the business of making good loans

that they are absolutely sure can be

repaid now banks are the most

traditional and conservative ways to

finance a business but they're the

hardest loans to get why is because the

banker that you're talking to his pay

his bonus his promotion everything is

totally determined by him making good

loans so they don't care about the fact

that your business idea is a great

business they mentally put that aside

what they want is convince me that you

will pay the money back even if your

business collapses so what do you need

well first of all you need a solid

business plan when you go to visit the

bank and you need realistic financial

projections also however you need

collateral or other existing business

assets that they could seize in the

event of a default here's an important

point when I started my business and I

built it successfully and then I moved

to a new city where I needed to get a

new loan I went to the bank and they

went back and forth with me for weeks

and months and finally they told me that

they needed five hundred percent of

asset collateral for every $1 that they

would lend so I had to prove to them I

had to put up my house my car my

royalties I had to give them and prove

to them that I had five dollars for

every dollar that they were advancing me

once they were convinced of that

then they lent me the money and watch me

very closely and when I paid it back

over time then they reduced their

collateral requirements so all it

required was my business operations and

a personal guarantee now another way to

raise money is called micro loans now

micro loans are small loans that you can

get for short term the supplier of micro

loans in the

space is called the Small Business

Administration SBA they've launched a

micro loan program to help small

businesses secure the financing they

need to either get started or to get

through a tough time to apply for a

micro loan is not that easy you'll have

to be within the local lending area of

one of the 170 nonprofit intermediaries

that process micro loans most micro

lenders also require borrowers to

complete business training and business

planning seminars before receiving the

loan so if you're thinking of starting a

business you call your local SBA or you

go onto the internet and you find a

small business investment corporation

often these are funded by individuals

often they're funded by governments but

their sole job is to give money or to

lend money under very tight conditions

to entrepreneurs and business owners to

startups who cannot get the money they

need but who have a good business idea

in the first place

now another way you can get money is

called social lending there are

so-called social landing websites where

individuals can apply for loans from

other individuals where they monetize it

and everybody puts money into a pool and

then there are people who watch it

carefully who will lend out small loans

so remember whenever you borrow money

the person who is lending you the money

has just one thought in mind how soon

will I get it back and how much will I

get back and if I'm lending you money

and taking a piece of your business what

will be my potential upside another way

to raise money is with trade credit now

trade credit is based on trust and many

companies are started on the basis of

trade credit one of the biggest

companies in the United States started

off with one man with a $1,000 loan from

his mother and he went out and he sold a

new service and every company he spoke

to said no we're not interested until

finally he found one company that says

yes we're interested in the service and

then he said wonderful I'll need a

deposit of 50% down so that I can

install the service until it begins

paying for itself and this one customer

said all right I

faith in you I will pay a 50% deposit

and you can then start installing the

service that you're selling he went on

to become one of the richest men in the

United States so whenever you can use

trade credit which means that you can

get credit from your suppliers or even

credit from your customers you can built

your business as a new business that

might take a lot of legwork and a little

bit of luck to secure trade credit but

it's worth it and the last type of

financing that we talked about before is

customers you can go to customers and

ask them to pay you deposits ask them to

pay you in full in advance you can show

them show your business plan and

convince people that your business is

solid so that they can feel confident

and giving you money even before your

business is off the ground now the pros

and cons of this are that if you're

going to buy the ingredients to create

your products and services you have to

turn them into cash quickly what this

means is that if you have an ongoing and

successful sales process so that you can

buy the post supplies sell them and pay

them back you can start a business with

very little cash of your own and

building on the cash and credit of

others so there's lots of ways to start

a business but the wonderful thing is

this is that if you are creative and

you're determined you can start a

business with very little money down

with very little of your own money and

with very little of anybody else's money

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you